Raising minimum wage creates partisan divide

Posted
Wednesday, February 12, 2014 1:00 pm

Herb Weiss

On Jan. 28, 2014, President Barack Obama gave his 2014 State of the Union (SOTU), a whopping 6,778-word speech, calling on both Chambers of Congress to either work with him to move the country forward or force him to use his presidential powers to enact policy.

“America does not stand still, and neither will I,” the president told a jam-packed Chamber. If Congressional gridlock continues, the president warned, “So wherever and whenever I can take steps without legislation to expand opportunity for more American families, that’s what I’m going to do. This would be accomplished by using executive orders, presidential memorandums to enact policies if lawmakers choose not to act on.”

Congress to Debate Merits of Minimum Wage

In a little over an hour, Obama rattled off dozens of policy initiatives for Congress to consider this session, including immigration, emergency unemployment, manufacturing, trade, environment, education, closing Guantanamo Bay, closing tax loop holes, job training, family policies, and retirement savings. But the president also called for an increase in the nation’s minimum wage to provide America’s workers a living wage. With Democratic and Republican gubernatorial candidates gearing up their campaigns to take the Ocean State’s top General Officer seat, look for ratcheting up the state’s minimum wage to be hotly debated throughout the nine-month political campaign.

While Obama’s push to raise the minimum wage was derailed last year by the GOP House and its Tea Party faction, the Democratic president noted that five states have already passed laws to raise theirs (including Rhode Island).

“With corporate profits and stock prices climbing, average wages have barely budged,” observed the president. “Inequality has deepened. Upward mobility has stalled. The cold, hard fact is that even in the midst of recovery, too many Americans are working more than ever just to get by, let alone get ahead. And too many still aren’t working at all.”

The president used his speech as a very visible bully pulpit to call on states to not wait for Congressional action to raise the nation’s minimum wage, to give people a living wage.

Until Congress acts, it is up to businesses to voluntarily give their employees a living wage or state legislators to mandate an increase. Obama urged the nation’s business leaders to follow the lead of John Soranno, the owner of Minneapolis-based Punch Pizza, who has given his employees a raise to $10 an hour. “Large national corporations should join profitable companies like Costco,” the president urged, “that see higher wages as a smart way to boost productivity and reduce employee turnover.”

Through an executive order the president announced in his SOTU address last Tuesday evening that he would ratchet up the minimum wage of federal contractors to $10.10 per hour, “because if you cook for our troops’ meals or wash their dishes, you shouldn’t have to live in poverty.”

“Today, the federal minimum wage is worth about 20 percent less than it was when Ronald Reagan first stood here,” the president quipped, noting that legislation to increase the nation’s minimum wage to $10.10 has been introduced by Senator Tom Harkin, an Iowa Democrat who is retiring after serving almost 40 years in Congress, and Democratic Congressman George Miller, from California, who is also leaving office after 20 terms.

Two Sides of the Coin

Although creating jobs will be one of the top campaign issues that must be addressed by the state’s gubernatorial candidates (Clay Pell was not available for comment by press time), look for the minimum wage issue to pop up for political discussion with the Democratic and Republican views being like two sides of a coin.

When he announced his bid for governor, Providence Mayor Angel Taveras told his supporters that increasing the minimum wage is a step in building an economy that supports higher paying jobs, puts people back to work and gives Rhode Island families the opportunity for a better life. There was a time when his mother worked at the minimum wage to support three children, so he knows firsthand how much raising it can help a family, he stated. He is also pushing for statewide universal pre-kindergarten.

Taveras quoted from a recent study by the Economic Policy Institute that indicated that increasing the minimum wage to $10.10 an hour would increase the wages of 65,000 Rhode Island workers and indirectly benefit an additional 26,000 more, totaling nearly 20 percent of the work force. He cited another study that found that moving to a higher wage would boost the national economy by as much as $22.1 billion, creating as many as 85,000 new jobs.

“I’m a Democrat who believes in raising the minimum wage and indexing it with regular cost of living adjustments,” noted Treasurer Gina Raimondo in her announcement to run for governor at Hope Artiste Village in Pawtucket.

According to Eric Hyers, Gina Raimondo’s campaign manager, “Gina strongly believes that we need to increase the minimum wage and she was pleased to see President Obama call for increasing the minimum wage to $10.10 an hour during the State of the Union this week. No one who works full-time should live in poverty. As the president said, it is time to give America a raise.

“But let’s not wait for a dysfunctional Congress to act; we can take action right here in Rhode Island,” states Hyer. “Gina is calling for us to take action on this now and raise the minimum wage to $10.10 by 2015 and then index it to the cost of living so that politicians can’t play games with people’s lives. Two-thirds of minimum wage earners are women, so a raise would immediately help women across Rhode Island and their families,” adds Hyer, noting that people are really struggling and there is an urgency to help out working families.

But the Rhode Island’s GOP candidates, Cranston Mayor Allan Fung and businessman Ken Block, are not buying the Democratic candidates’ solution that minimum wage is the way to go.

“Democrats continue to recycle bad ideas. It’s time we consider some new ones so people have the opportunity to succeed and thrive, and not rely on government coercion to dictate wages. Increasing the minimum wage will result in higher unemployment, reduced job opportunities, reduced customer spending, and will reduce net job growth because of the effect on expanding companies,” said Mayor Fung. “At a time when we are tied for the highest unemployment in the country, we cannot put more hurdles in front of the companies we have here in Rhode Island; we need to remove them. Further, Obama Care is already hurting workers because employers are transitioning employees to part-time work because they cannot afford the health care premiums. An increase in the minimum wage would only increase the burden on small business owners who are already working on thin margins.

“The real issue in Rhode Island is unemployment and getting our workforce prepared with the necessary skill set for the ever-changing workforce. It is quite evident that raising the minimum wage would not solve these problems,” added Fung.

Gubernatorial candidate Ken Block agrees with Fung, noting in a recent statement, “As I said the other day when it was announced that Rhode Island has the worst unemployment in the country, raising the minimum wage is a job killer.”

Block added, “President Obama seems to believe that government can just order the economy to improve. Republicans and Independents know that government has a critically important but limited role in the growth of jobs. Government’s role is to regulate fairly and only where necessary, and to control its spending so people and businesses are not taxed to death. President Obama continues on the wrong track to fix lagging employment, just as the Democratic leaders of our General Assembly continue on the wrong track to fix Rhode Island.”

Edward M. Mazze, distinguished university professor of business administration at the University of Rhode Island, added his two cents into the policy debate, too.

“On the one hand, raising the minimum wage does not create jobs and can reduce the number of hours worked for existing workers and the number of jobs for part-time workers. There could also be an impact on the number of internships offered to high school and college students. And, just as important, raising the minimum wage will also raise the price of products and services,” observed Mazze.

“The minimum wage is not the entry point to middle class; it is the jobs that pay over $20 an hour and have a career future,” said Mazze, noting that Rhode Island recently increased the minimum wage.

But Mazze believes that the state’s minimum wage should be adjusted every number of years to keep up with inflation and other economic events.

“The best way to create living wages in Rhode Island is to prepare workers for jobs for the future, have an economic development strategy that creates jobs and attracts businesses, and have affordable housing and a fair sales, property and personal income tax program,” he noted.

With the Rhode Island General Assembly geared up to pass legislation to make the Ocean State an easier place to do business, lawmakers should not forget their constituents who cannot pay their mortgage, utility bills, or even put food on their tables. Until the state’s tax and regulatory system primes the economic pump to create more jobs, giving a little bit more money, say $10.10 per hour, will go a long way for tens of thousands of poor or working poor Rhode Islanders who struggle to survive.

How can Rhode Islanders currently making a weekly paycheck of $320 (minus taxes), receiving a minimum wage, support their families? This is not the American Dream they were brought up to believe in.

Herb Weiss, LRI12, is a Pawtucket-based writer who covers aging, health care, medical and business issues. He can be reached at hweissri@

Comments

How many times must it be said "Entry level jobs are not meant to support a family". Entry level gets you job experience and references. Government thinks it can just make something worth more, sorry it doesn't work that way. Remember the politicians and bureaucrats have a stake in this, taxes. More income taxes, Social Security, FICA, unemployment and temporary disability. I'm sure there's more, just can't think of them.

Want to give everyone a raise, so everyone has more money to spend? Cut the sales tax.

When the business pays more for wages it must raise prices of goods or services. As this happens across the economy it's inflation and the worth everyone's dollar DECREASES. A dollar is a dollar you just can't buy the same amount of goods or services with it.

If this was such a great plan how about making minimum wage $1,000.00 an hour? Bureaucrats won't do it because everyone will se the effects immediately. They can't have that, the frog has to be heated up slow or it jumps out of the pot before being cooked.

Michael, you capture the argument brilliantly. To wit, government should determine the acceptable level of corporate profit margins, and how those profits can be spent by business owners. Of course, the owners of hundreds of thousands of American businesses are mutual fund shareholders and pension funds, or nearly 65% of the adult population. Do you plan to dictate to each of 162 million people how they are allowed to spend their money, or just some of them? RI's economic malaise has nothing to do with the minimum wage, but rather a poorly educated adult workforce, burdensome regulations, confiscatory taxes and, frankly, the class envy-driven policies endorsed by the Michaels of the state.

Today many people are working entry level jobs, including college educated workers. They deserve fair pay for their work. Because employers like Walmart pay minimum wages, workers also rely on government assistance, section 8 vouchers, food stamps, etc. Taxpayers are paying for this! Let businesses pay their employees fairly and earn less profit.

warwick10 well said. Fair pay is going to the CEO's making hundreds of millions. No the CEO is not the back bone of a company, that is a puppet figure. The workers are the back bone. It is modern day working slave labor. It also is called the working poor. What people don't understand is some working minimum wage have graduated high school and may be even have some college, or even a degree.

The "slaves" of whom you speak are entirely free to offer their skills to any employer they choose. The employer and employee will then negotiate a wage that is fair within the context of the greater marketplace. It's really that simple. And according to the most recent salary data from Business.Time, the number of CEO's making over $100M is, uh, zero. Many CEO's do, however, make good money. Perhaps it's time you became a CEO, where you will be paid precisely what you are worth to the organization. Much like your employees.

JohnStark tens of millions a year over the course of a career equal into the 100 mil.

You obvious are either a business owner or a ceo and I'm hitting a nerve.

How about the ceo for JC Penny driving that company right into the ground. I bet they regret that move promoting him to ceo.

Again, my point is ceo's are not worth that kind of money and it would be better spent spending it on their employees. But, you seem to have a hard time understanding that. You must be part of the elite 1% so you wouldn't understand

JCP hired Ron Johnson from Apple. He wasn't promoted. He drove the company into a ditch and therefore was fired. I think CEO compensation is often not in line with performance, but the BOD does and that's what matters. Making $30,000,000 for hitting a baseball or playing a role in a movie don't make sense to me but it does to the owners of those business'.

Only 14% of people earning minimum wage are heads of households. Raising the minimum is the wrong answer to a problem that doesn't exist.